ACCC v Derodi Pty Ltd [2016] FCA 365: Free Range Egg Farms Found Guilty of Misleading Conduct
Friday 22 April 2016 @ 10.26 a.m. | Legal Research | Trade & Commerce
As reported in a recent ACCC Media Release, the Federal Court has imposed a penalty of $300,000 on Derodi Pty Ltd and Holland Farms Pty Ltd (trading together as Free Range Egg Farms), for making false or misleading representations [namely, ss 29(1)(a) and 33 of the Australian Consumer Law (the ACL), which is contained in Sch 2 to the Competition and Consumer Act 2010 (Cth)] in their labelling and promotion of eggs as “free range”, in proceedings brought by the Australian Competition and Consumer Commission (the ACCC).
Background
This case forms part of the ACCC’s broader work in the area of free range claims made by egg producers and the actions by the ACCC have previously been covered by TimeBase.
On 31 March 2016, Commonwealth, State and Territory Consumer Affairs Ministers agreed to the introduction of a national information standard under the ACL, requiring eggs labelled as “free range” to have been laid by hens with meaningful and regular access to the outdoors and with a maximum outdoor stocking density of 10,000 hens. The Ministers expressed their desire for the information standard to be in place within 12 months.
The Offences
Free Range Egg Farms supplied eggs labelled as “free range” under the brands:
- Ecoeggs;
- Port Stephens; and
- Field Fresh free range eggs.
Free Range Egg Farms also promoted these eggs as “free range” on the brands’ respective websites, Facebook, Twitter, and in a magazine advertisement.
Findings of the Court
The Court found that by labelling and promoting the eggs as “free range” during the period from 1 January 2012 to 2 December 2014, Free Range Egg Farms contravened the ACL by representing to consumers that the eggs were produced by hens which were able to, and did, move about freely on an open range on an ordinary day, when this was not the case.
In fact the hens from some of the farms that supplied eggs to Free Range Egg Farms did not move about freely on an open range on most days because of the conditions in which the laying hens were kept. Those conditions included the flock size in the barns in combination with the size, placement and use of the physical openings to an open range.
In his judgment, Justice Edelman commented that the contravening conduct was significant, occurring over nearly a three year period and involving a widely consumed food.
His Honour noted that the conduct concerned “representations upon which consumers were heavily reliant” and that the loss and damage suffered by consumers and competitors of FREF is likely to be significant.
His Honour further stated at [para 59] that:
“… the words "free range" are now very well known. … They involve a representation with real content which, in this case, was coupled with powerful pictorial and verbal imagery.”
Response from the ACCC
The ACCC Chairman Rod Sims said:
“Credence claims such as ‘free range’ are powerful tools for businesses to distinguish their products. Consumers are willing to pay a premium for free range eggs on the understanding that they are getting something different to ‘cage’ and ‘barn laid’ eggs. Where free range egg claims are not true, consumers are harmed and, as important, other egg suppliers who are producing eggs that are genuinely free range are disadvantaged. This decision reinforces the position the ACCC has taken that any free range egg claim must be backed by farming conditions which allow hens to actually move about on an open range each day.”
Ecoeggs are available nationally (except in Tasmania), Port Stephens eggs are sold in New South Wales and Victoria, and Field Fresh eggs are sold in New South Wales.
TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.
Sources:
Free Range Egg Farms ordered to pay $300,000 penalty for false or misleading “free
range egg” claims – ACCC Release MR 49/16
ACCC v Derodi Pty Ltd [2016] FCA 365 (14 April 2016)
